Food Franchisepedia

All things about food franchising business

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Food Franchise : Money making alternatives in India.

We are often asked which food franchise makes the most money? We have been evaluating franchise businesses since more than a decade and over the years we have built processes to evaluate the profitability of a store.

In 2019, one of the newer brands in Indian food, Petoo was found to be the food franchise which makes the most money when compared to the investment it requires to setup and operate. It is important to understand that the franchise's ability to earn profits should be related to the investment which is needed to set up and run the business. Petoo scores high on this front as it is one of the most low cost franchise options available today in India. This low cost of Petoo's franchise is due to its innovations in the food production processes. We will come to how this innovation helps in making the food franchise make the most money soon.

Most franchise owners end up compromising on the location of a store due to high rentals, this however is the worst mistakes you can do. For any retail business, its location is by far the most important criteria for success. A great business or a brand will fail to generate revenues if the choice of location is poor. So if you want to save money, save it when you choose a brand, but when you have chosen a brand you must not cut back costs on the locations. The importance of this factor cannot be overemphasized and restaurants have a high mortality rate due to this factor alone.

In case of Petoo because of the innovative food production process, the size of the kitchen required in the outlet is very small. This helps the franchise to take up a smaller outlet at a great location resulting in very high real estate utilization ratio i.e the ratio of outlet's carpet area available for seating customers vs area required by the kitchen. This is perhaps the most important benefit of Petoo, as a result  of which this is the food franchise which makes the most money. Apart from this efficiency Petoo has also built a very youthful brand and has taken a very innovative take on Indian food. All these when put together makes Petoo not just a great food franchise opportunity but also a money making machine… in other words Petoo, currently is the food franchise which makes the most money in India.

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Should you go for a large food chain or upcoming chain for food franchise?

There is no right or wrong answer to this question and opportunities offered by large as well as an upcoming brand should be systematically evaluated by a prospective franchise partner. In many cases the availability of capital would serve as the singular reason to determine which of the two would suit the franchise partner. We have analyzed thousands of global franchise brands and listed a brief summary of our findings.

 While a large chain has its obvious benefit of having a well oiled and proven business model, the downside is usually around the cost structure of setting up the outlets, the franchise fees and the recurring royalty charges. The following are the usual benefits of a large established food chain:

·         Well defined and tested back end processes and menu offering

·         Availability of plenty of case studies for marketing/promotions and growing the business. This reduces the risk of experimentation and wasteful expenses in trying out ideas

·         Hiring and retaining quality staff is easier.

The following are the risks:

·         High setup costs typically due to high brand fee (franchise fee)

·         Less skin in the game. Since the brand is already large, success or failure of one more outlet is not critical to the brand's success.

·         Usually high recurring royalty charges.

·         Slow approval processes leading to slow response to market changes.

On the other hand an upcoming food franchise usually is nimble footed and will grow at a far greater speed than a large brand,  the challenges are usually around processes and menus which would most likely be evolving.  Some of the benefits of working with upcoming chains are:

·         Low franchise fee and low royalty fee.

·         Very high skin in the game of  the brand, your success is critical to their success.

·         Early franchise partners usually get large incentives and good support in marketing their outlets.

The risks:

·         Back end and operational processes of a brand usually evolves in the first few years.

·         Changes in outlet operational processes might in some cases necessitate new equipment or adjusting the outlet kitchen layout.

·         Brands may still be experimenting with marketing ideas.

In our opinion a prospective franchise owner must objectively assess franchise opportunities offered by an upcoming brand. In the long run an upcoming brand might be able to provide much bigger returns than an established brand. Few things which you must evaluate before signing up with an upcoming brands are:

·         Understand the operational process (hiring/training, procurement and food supplies ).

·         The credentials and the experience of the founders, management team.

·         How is the company funded and the credentials of the investors?

·         How approachable is the operational team?

·         Ask for case studies of marketing activities conducted.

·         Outlet financials and P&L of some existing stores. Typical break even period for a store.

There are  innumerable examples of large franchise brands failing and also of upcoming brands becoming very successful. You would also find examples to prove the contrary.  Which essentially means there is never a 100% guarantee with either of the options. As in any other business there are elements of risks which can be averted if the entrepreneur works on the challenges smartly.

So the key to success is to work with a partner who is willing to learn and grow with you.

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5 Things you must do before choosing a franchise

Running a franchise is one of the easiest and the smartest ways to enter the retail business segment. Whether your preference is food or groceries or footwear or garments or eye wear you will definitely find a brand to partner with.

While franchising is definitely the best known way to run a retail business you must do the following 5 things before you choose a franchise partner to work with.

Study and evaluate the opportunities of the business vertical you want to enter into. The business vertical should be mapped with the city/locality demography to understand the hyper local opportunity. For example - Opening a premium sportswear brand in a tier 2 city from which most youth migrate to other larger cities for studies and jobs might not make good business sense.

  After selecting the business vertical the factor which is of singular importance is "funds". You should follow the below formula while calculating the funds you need to keep aside to invest in the project.

The investment amount = Setup Cost + Running cost of the restaurant for 6 months

It typically takes a few months for any retail outlet to achieve profitability and hence before opening an outlet you must plan for funds assuming the outlet will take a minimum of 8-9 months to reach its profitability.

  Now that you have chosen your business vertical and decided on the budget for the project you must investigate the area in which you should setup the store. You must do some basic research in the locality to figure out the market opportunities.

 For example - It may appear that opening one more garments franchise outlet in a locality which already has 10 other established garments retail shops is not a wise move. However, a closer analysis may reveal that there is an absence of a seller specializing in wedding/party wear or that there is a lack of a new age branded clothing wear for youth.  Since such a cluster would already be drawing customers interested in buying garments in large numbers the business might just turn out to be a blockbuster.

  Most retail businesses end up not doing well because the owners either do not spend enough time in growing their business or most get too involved in the day to day operations and are unable to focus on sales/marketing. Before opening up an outlet you must ensure that either you or your business partner spends full focus of theirs in the first 6 months to grow the business. If you are starting the business with a partner then there should be a clear demarcation of the roles and at least one of you should focus on sales and marketing. Running a retail business should never be a part time job if you intend to make it profitable.

 When you have chosen the retail vertical and determined the amount of funds you can invest, selecting a franchise partner becomes the most important decision. While evaluating franchise partners you must evaluate the following:

1.       Cost of setting up an outlet (franchise fee, setup fee and other costs).

2.       Monthly operational cost of an outlet, number of staff required, training and evaluation of the staff.

3.       Margins for franchise and the royalty fee.

4.       Study some P&Ls of existing stores.

5.       Credentials of founders, investors and core team.

6.       Support process and escalation path.

7.       ERP and CRM system's capability.

  It always helps to be prepared before you take the plunge, we have seen this work with thousands of franchise owners and guarantee that if you follow the above list diligently you will most likely have a fantastically profitable business.

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What is better - a franchise or your own business?

From the outside, running a retail business usually appears to be one of the most lucrative options available to entrepreneurs. The reality however is entirely opposite of this general perception. Running a retail business is in fact one of the most difficult businesses to sustain and grow. The main reasons behind this notion are:

1.High rentals for retail locations - Commercial rentals is one of the least understood factors in a retail business. Rent is the premium one pays for the footfall the space has the potential to generate. Unfortunately entrepreneurs just go by the prevailing market rates and do not calculate if the premise rental justifies the customer acquisition cost.

 2.Hiring and training - This is another big problem area. Attracting and retaining blue collared workers who are typically employed in retail shops are not just difficult to hire but doubly difficult to retain.

 3.Store designing/branding - This is considered to be one of the easiest things to do. Usually most business owners will engage a designer to get this done. This however is one of the gravest mistakes one can do, the problem is that designers seldom designs the stores or branding with the understanding of the customers profile and the positioning necessary to make the business viable.

 4.Pricing - Most retail businesses figure pricing out by trial and error. Which often results in financial uncertainty and also puts the business at risk.

 5.Market insights - Understanding the basics of the market trends/ seasonality in a given space helps. For example - Sales of garments/footwear pick up pace during the festive and wedding seasons but remain flat for the rest of the year. Food on the other hand is an evergreen business with a consistent consumption pattern throughout the year.

The good news however is that all the above problems are almost entirely solved by taking up the franchise route. A franchise business not just provides ready-made solutions to branding/pricing/hiring etc but it also guides prospective partners to determine important factors like determining if rentals of a given space is viable or not. We recommend aspiring retail entrepreneurs to definitely evaluate franchise businesses especially if they do not have experience in the domain they are choosing to enter. A franchise business makes sense even for those who have experience in the chosen business domain as it reduces the operational burden on the entrepreneur allowing them to focus on growing the sales of the store.

To summarize whether you are interested in eye-care, footwear, garments or the food space it is always smarter to choose a franchise partner who for a small share of the profits will take care of most of the operational and marketing overheads from you allowing you to focus all your energies on generating profits!

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Food franchise in India: Consider these before making your decision.

One of the most common questions we hear by aspiring food retail entrepreneurs trying to enter a franchise business is "which food franchise is best in India"? While there are multiple food franchise brands it is often difficult to judge who should you invest your time and money with?

The most important point for consideration is the capital you have earmarked for investing in the business. You must ensure that the capital should cover :

1. The cost of setting up the business (assets, brand fee etc)

2. The operating cost of the business for at least 4-6 months

3. Some funds earmarked for marketing and promotions

There are food franchises available in India which cost anywhere from a few lakhs to few crores in setting up the business. Your decision on choosing the franchise partner should depend only on the food franchise brand's ability to generate profits for you. So for example even if you can spend 1 Crore in the business you should evaluate whether it makes sense for you to open a single outlet for a food franchise which costs up to a Crore or you should open 4 outlets of a brand which costs around 20 Lakh per outlet. Opening up multiple outlets of a food franchise brand makes sense as it helps in optimizing cost and distributing risk over multiple locations. For example you could hire a senior operations manager to oversee the operations on your behalf while you focus on marketing to grow the sales. It is quite well known that location plays a crucial role in deciding the fate of an outlet. Opening multiple outlets ensures that the risk due to the viability of a location is distributed. So it is recommended that franchise enthusiasts should open multiple outlets of a brand.

In low cost franchise models currently doing well in India, an upcoming brand Petoo is one of the best food franchise options available. The cost of a Petoo's franchise outlet starts from as low as 7 Lakh and goes up based on the size of the outlet.  Don't however be fooled by the low investment as this is one of the most cool brands you will come across. The low investment in setting up an outlet is due to the efficient food production and cooking process developed by Petoo which ensures that the outlet kitchen does not require any heavy equipment. Another benefit of this efficient food production process is that most of the cooking happens centrally at factory-scale kitchens and hence the number of cooking staff required in an outlet is low. Despite the tiny kitchens inside the outlets, Petoo's menu consists of fantastic offerings in light and heavy eats. In a short period of 1 year Petoo is now present in 10+ Indian cities serving thousands of customers everyday. Petoo undoubtedly is one of the best food franchise brands in India today. If one is looking to run a professionally run food franchise brand do look at what Petoo has on offer. 

Read also : Biggest food franchise in India

 (Image Sourced)                               

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Cheapest fast food franchise in India: Good choice to invest.

The cost of a food franchise varies from few Lakhs to few Crores. This obviously depends on the format of the outlet, it could cost in Crores if it’s a fine dine or a large restro pub. Some of the low cost widely available franchise options are juice, tea or sandwich joints. One of the new entrants in QSR space is Petoo, within a small period of a year they have scaled to 7 Indian cities and multiple corporate cafeterias.  Due to it being a new brand, Petoo is one of the cheapest fast food franchises in India and it is perhaps the best time to latch on to the brand as it is now trying to scale at a rapid rate. Petoo is backed by some of the most well known investors in India and from the way they have innovated on food production and created a youthful aspirational brand they definitely seem to have a very bright future.

The biggest benefit of Petoo is not just the low cost of franchise rights but the following:

a. Low setup asset light model - The kitchen does not require heavy equipment and only requires a simple pantry setup. Some ambient storage space, oil fryers, a stove and basic refrigerating setup is all that is needed to go live with a Petoo outlet.

b. Low running cost - Petoo's model is based on centralized cooking process. Due to this, the outlet does not need to cook any dish from scratch which inevitably results in needing less outlet staff to run the store. Less people means less cost in salaries, less overheads in team management and lesser worries about attrition/re-hiring!

The above said reasons make Petoo currently not just the cheapest fast food franchise in India but also one of the easiest to manage. Low cost of set-up and operate, great food and attractive branding ensures Petoo to be the most value for money investment you can get into. Low operational overheads also ensures you can spend more time on growing the business and sales. The franchise opportunity for Petoo starts from as low as INR 5 Lakh all inclusive for a Petoo cafeteria kiosk model. So if you are exploring food franchise opportunities do give Petoo's low cost model a look. 

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Food Franchise in India: Some of the popular names.

 In the world of franchising, food continues to rule the roost. Some of the oldest and the largest franchise based businesses in the world today are food franchises. While setting up a food franchise is a herculean task but if done well it is one of the most lucrative opportunities not just for the brand owner but also for a franchise outlet owner.  If you are looking to take a food franchise opportunity you should go through the list of food franchises and evaluate them objectively before signing up with one. The analysis should be based on calculating the return on investment on the capital and the monthly recurring expenses.

 Let’s take a look at the list of  food franchise in India. Please note that this food franchise list is in no particular order of relevance.

 If you have large capital at disposal to take up a master franchise then you should look into International brands which are looking to either enter or scale their business in India. Below is a list of some of the food franchise brands which fall in these categories are:

 1. Taco Bell

2. Papa Johns

3. The Crepe Cafe

4. Belgian Waffles

5. Sbarro

 You can also look at taking master franchise rights for upcoming Indian brands which have done very well.

1. Moti Mahal

2. Wow Momo

3. Petoo

4. Sagar Ratna

5. Pind Balluchi

 A franchise opportunity for a quick service restaurant (QSR) is one of the better options for a new franchise owner,  as it requires lower capital investment when compared to a fine dine or a casual dining restaurant (CDR). A QSR is also attractive to youth leading to higher footfall and volume of sales. Some of the top QSR franchise lists in India are:

1. Petoo

2. Chai Garam and other tea brands

3. 5 star chicken

4. Naturals ice cream

5. US Pizza and fried chicken

After our analysis of the food franchises, we came up with a list of food franchises which require the least setup capital and have very light recurring operational costs. This is a very good feature for a franchise brand as it enables a franchise owner to have multiple outlets at the cost of opening one. Having more than one  outlet not just adds a lot of efficiency in managing and rotating the team but also enables the owner to spread out the risks and recruit a good team to manage the outlets.

1. Naturals ice cream

2. Petoo

3. Monginis

4. Rolls Mania

5. Gianis

We have just listed the top 5 food franchises in this list, there are obviously many more such brands which keep being introduced everyday! Hope this list helps you in deciding which franchise to take up and also guides you in deciding the parameters to use to evaluate a franchise model. 

[foodfranchisepedia]

Cloud kitchen franchise - will it be profitable?

Cloud kitchens have become very popular in the last 4-5 years. As per definition, a cloud kitchen does not have a customer facing brand i.e. a customer cannot walk into a cloud kitchen to eat or pick up food. The cloud kitchen will only deliver food to a customer. This is considered to be beneficial model as it costs less not just to setup a cloud kitchen but it can also be opened at locations which are not prime properties resulting into far lower rentals.

When this concept was new 5 years ago it made sense because the cost of delivering food was low. A delivery boy would usually pick 5-10 orders from restaurant and deliver them one by one. This made sure that the cost of delivering food was less than INR 10 per order. The online ordering platforms charged 10% commission so the overall cost would come to around 15%.

With the rapid growth of food delivery apps like Zomato, Swiggy etc this however has changed. The cost of delivery boys have tripled and the clubbing of orders is rarely done to ensure faster delivery to customers. All this has caused the per order delivery cost to skyrocket to almost 70-80 Rs or 25-28% of net revenue. Due to this reason home delivery has become a very low margin business for restaurants which in turn reduces the chances for a cloud kitchen to make profits because the cushion provided by higher margin dine-in or takeaway orders are anyways not applicable to them.

Another less understood problem is that because the cloud kitchen does not have a customer facing outlet it is difficult to create customer recall without spending a lot on advertising. A large amount also needs to be spent on giving discounts as customers usually gravitate towards brands which give discounts. Without discounts and buying ad slots on these platforms it is difficult for a new brand to make its presence felt. Due to this reason the cost benefit of reduced rental is entirely lost.

Cloud kitchen franchises hence are a very risky business to get into. Unless the franchise is being offered by a very popular brand which has the capability to charge a premium price on its products it will be difficult for the franchise to make profits. Below table shows the unit economics of a typical home delivery order.

Food cost is typically 35-40 % ,Commissions 25-28% ,Usual discounts 20-30%

,Total 80-98%.

 The above leaves very little to manage salaries/rentals and other expenses. Under such a situation the franchise will most likely end up not making any money in the short or long run.

We believe that the ideal model for any restaurant business is an Omni channel approach. This has been used very effectively by brands of late. An Omni channel approach means you have both cloud kitchens as well as consumer facing stores. A customer facing store will not just help in creating brand recall but will also help in catering to dine-in/takeaway orders. Whereas a cloud kitchen can be used to make home delivery orders very efficient or can help in scaling in locations where rentals of retail places are very high. Having a brand also reduces the dependence on discounts to attract customers for online food ordering. Not having discounts improves margins and makes a cloud kitchen model financially viable. So if you are looking for a franchise you must evaluate the unit economics of the orders before signing up with the brand. Even if the brand offers a fixed income check if the business is sustainable in the long run, else you might end up losing a lot of your hard earned money.

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Low Investment food franchise in India.

Franchising is considered as one of the least risk involving methods to build a retail business across the globe. Of the various franchise options available, food franchise is a particularly popular option among franchise aspirants. This is namely because of the following reasons:

1. Food is considered and quite truly so as an evergreen business with very little fluctuations rising out of seasonality.

2. Unlike most other domains it is possible to have food franchise with low investment.

One of the best opportunities for a food franchise with low investment is offered by a brand called Petoo. It not just costs less to open a Petoo's franchise outlet but also costs 50% less to run the operations of the outlet. This results in a huge advantage for franchise owners as the store not just turns profitable faster but also can recover the capital invested earlier than any other franchise brand currently operational in India. Now don't for once think that to become the food franchise with low investment Petoo compromises on food quality or offers a limited menu. On the contrary, we found that the food quality is better than most popular restaurant brands. The menu offering at Petoo is also exhaustive and includes popular regional rice bowls, biryani combos, starters, snacks and desserts as well. This low cost is possible due to the innovation in food production which cuts down the dependence on a large kitchen or trained chefs.

This low cost of setting up the outlet is very helpful for a franchise owner because she can then earmark larger funds for marketing and growing the outlet's business. Many franchise owners also use this as an opportunity to open multiple outlets at the same time. Opening multiple outlets help in hiring a better management team to manage operations on behalf of the franchise owner. This in turn enables the franchise owner to spend more time in developing partnerships and focusing on ways to grow the outlet's sales revenues. Overall Petoo offers a great opportunity for franchise aspirants who are looking for food franchise with low investment to be part of India's fastest growing food business. 

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Food franchise Royalty Fees

A franchise brand owner usually earn their revenue in three ways :

a. Margins on products which are sold to the franchise owner which in turn is sold to the end consumer. This however is applicable only if the franchise brand manufactures their own products. In a lot of cases, brands outsource manufacturing to vendors and in some cases they manufacture some of the key ingredients in house. As a result the opportunity to earn revenues from the sale of products is close to zero.

Even in cases where the brand manufactures their own products the margins for them is very low as the end price for the consumer needs to be competitive enough for the franchise owner to be able to make profits from his own sales.

 b. Franchise royalty fee on the revenue : Food franchise royalty fees is perhaps the only feasible way in which a franchise brand owner can make money which in turn will pay for the cost of the brand's central team and other expenses. The typical recurring expenses for a franchise brand are:

1. Marketing/Technology/Kitchen/Procurement/Warehousing and support team's salary expenses

2. Marketing and promotions cost - brand building/PR/digital and social media marketing costs

3. Costs of designing and collateral manufacturing

4. Legal, Financial and compliance costs

5. Server costs and costs of managing/upgrading software

A typical food franchise royalty fee varies from 2% - 10%. There is no right or wrong number, however it is imperative that the franchise brand charges this fee from their franchise partners else the business will be at an existential risk if food margins are adversely impacted due to ingredient’s price fluctuations.

 c. Franchise fee

Contrary to general perception, franchise fee is usually not a large revenue source for most franchise brands. In most cases the franchise fee acts as a reimbursement for a number of expenses which a franchise owner incurs from the time a franchise is on boarded till the operations of the outlets are kick started. Some of the costs incurred by franchise brand owners are :

1. Licensing or setup costs of systems/software which will be used by the franchise

2. Costs of hiring of outlet employees and costs of training/certification of franchise owners and the staff

3. Branding/designing costs customization specific to outlet's size/format

4. Project management/auditing costs during store construction/development

 A brand in its early stages of growth keeps the franchise fee/franchise royalty fee low or in some cases they even waive it off to attract franchise partners. It is often very rewarding to those franchises which are in their early stage of growth due to this reason. It is important for franchise partners to understand the financial terms of the franchise brands clearly before signing up. You must clarify what the franchise fee includes and if at the food franchise royalty fees the business is sustainable for them in the long run. 

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QSR food franchise : Why should you consider one.

A survey conducted by a popular Franchise Management brand in India showed that 74% of consumers surveyed (people who were interested in taking up a franchise) wanted to start a food franchise. This phenomenal number proves that a food franchise option is one of the most popular opportunities available in the world of franchising. The survey also pointed out that most consumers surveyed were unaware of the different formats of food franchises and did not know for example that, should they opt for a Casual Dine restaurant (CDR) food franchise or a Quick Service restaurant (QSR) food franchise. In this article we will talk about the different franchise formats.

 Restaurants can primarily be classified in four broad categories :

1. Fine dine or experience dining restaurants

2. Casual dining restaurants(CDR)

3. Quick service restaurants (QSR)

4. Pubs/Bars and Breweries

 While we can obviously sub categorize restaurants further but for a basic understanding the above 4 should serve the purpose.

1. A Fine Dine Restaurant usually requires large investments for setup, most of which will go towards having a very premium ambience and a well equipped kitchen. It also requires a large pool of manpower in the kitchen and a large well trained team for customer service. The average meal cost in such a restaurant is typically high and it attracts premium customers who are looking to enjoy a unique dining experience. Such a restaurant requires a very trained chef who can create unique handcrafted dishes. Some of the very popular fine dine restaurants in India are Punjab Grill, Moti Mahal and Mainland China. You could consider taking up franchises for such brands only when you have large capital at ready disposal. Such outlets are not just expensive to setup but also require sustained investments for months till the outlet reaches its steady financial state. Pubs/bars and breweries also belong to the same category as fine dine restaurants, with the added necessity of a liquor license. A fine dine restaurant usually have a very high risk and reward quotient!

 2. A casual dine in restaurant(CDR) is a low frill version of a fine dine restaurants. These outlets usually cater to the frequent meal needs of a consumer and serve regular dishes at affordable prices. This category has the largest number of restaurants in India and is also one of the most challenging categories to succeed in. Since consumers do not come to these category of restaurants for an experience, value becomes the most important criteria for the success of a CDR. Chains like A2B, Sarvana Bhavan, Wah ji Wah are some of the popular Casual dining restaurants in India. In our opinion a CDR is not one of the most attractive food franchise opportunities.

 3. Quick service restaurants (QSR) in India is the fastest growing segment for restaurants in India. Due to change in a young consumer's preferences, there is an enormous opportunity for large number of QSR food franchises or QSR brands in various cuisines and food categories in India. Some of the largest restaurant brands in the world are QSR food franchise, for example - McDonald's, KFC, Subway etc. However in India the QSR space is in its early days of growth and we are just starting to see the onset of cool brands with innovative offerings. A QSR food franchise is also the best food franchise to own because of low investment and tight operational processes. A QSR food franchise is the most recommended franchise format because of its low capital need to setup and its potential to generate excellent return on investments. Some of the fastest growing QSR food franchises in India are Petoo, Naturals Icecream etc. New age brands like Petoo enable a franchise owner to run multiple virtual food brands for online aggregator platform. 

From our analysis and market research we have found that a QSR food franchise has given the best returns to franchise owners in the past couple of years and this trend will continue to grow in the next foreseeable future. While a fine dine or a resto pub does offer higher returns, it is extremely capital intensive and hence falls in the category of a high risk opportunity.

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What should you do - open your own restaurant or take a restaurant franchise?

Opening a restaurant is a dream for many. From the outside running a restaurant feels a fantastically relaxing business and a fun thing to do, at least that’s what the movies portray it to be.

The reality however is totally different. Setting up and running a successful restaurant is one of the most difficult businesses to build and sustain. There are multiple challenges in running a restaurant, the top three being :

1. Staff hiring and retention - The attrition in food industry is usually very high. Because of low salaries, people switch jobs even if they get tiny increments. Chef's usually have their favorite team and whenever they leave they take along with them their core team members, usually leaving a void at their current place of work. The problem is compounded when recipes are not standardized and the taste of the restaurant changes with any team change.

2. Taste standardization - Most restaurants do not use standardized ingredients or processes. They usually depend on the chef to create recipes as a result of which there is always a human element in the process. Which effectively means the taste will always be a variable at such restaurants.

3. Break even takes time - A restaurant usually takes a few months to achieve its break even (0 profit, 0 loss) point. During the time when the restaurant hasn't reached its profitability it requires the owner to keep providing for funds to keep up with its operations. Non experienced restaurant owners often commit the cardinal sin of cutting back on costs (food quality, number of staff, cheaper less qualified staff, marketing costs) during this time which unfortunately dents the restaurants chances to achieve profitability.

Apart from these you would also need to tackle food wastage, pilferage, ingredient price fluctuations and spearhead effective marketing campaigns to attract footfalls to your outlet. Overall, running a standalone restaurant is a difficult backbreaking task. It also carries a large financial risk as 7 out of 10 restaurant shut shop within their first year of operations.

The above problems are difficult to solve for a standalone restaurant but it is easier to do so for a group of restaurants, in other words a franchise. Modern restaurant franchises usually solve for a lot of these challenges faced by owners. Franchising hence becomes the most obvious choice if you want to own and operate a restaurant business. 

A franchise brand usually has the following responsibilities:

1. Create a brand and help the outlet owner with anything required by them to advertise its outlet.

2. Do the consumer research and develop a menu based on the learning. Iterate on the menu based on continuous consumer feedback.

3. Conduct store audits to check conformity of brand guidelines.

4. Help franchise owner with managing product inventory.

5. Help franchise owner with hiring/training/certification and retraining of staff.

6. Optimum usage of Centralized production and cutting edge software which can ensure pilferage, inventory management and food wastage are no longer a concern for the restaurant owner. Thus enabling the owner to focus all his/her energy on growing the business.

So, if you are looking to get into the restaurant business, you must evaluate franchise opportunities. Running a franchise increases multi fold the chances of your restaurant succeeding. 

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Explained : How to own a food franchise ?

One of the most common questions asked by a franchise aspirant is “How to own a food franchise ? “

You will be happy to know that owning a food franchise today is quite easy. Thanks to the new age food franchise brands both International and homegrown  who have innovated on building processes which in turn makes owning a restaurant franchise very easy.

The easiest way to search for a franchise, is either to search on Google or to go through some of the franchise listing platforms like Franchise India. However you should understand that most good franchise brands do not use the listing platforms. There are also trade shows were you can meet franchise brands but in our experience these trade shows are seldom useful in meeting good franchise brands.

Once you have discovered the franchise brands, reach out to their representatives to know the details of how to own a food franchise.

Following are the questions you must ask from franchise brands:

1. The details of the responsibilities of the franchisee and the franchisor.

2. The cost of setting up the outlet.

3. The usual operational cost of a store.

4. If it is a new franchise brand then feedback on online platforms by customers or franchise partners can be very misleading. Instead of relying on online reviews, you should try to speak to some existing franchise owners to find how the brand performs on their areas of responsibilities.

6.  Understanding the food margins and the royalty structure.

7. Understanding how the franchise brand collects and handles customer feedback.

8. The marketing support provided by the brand to a franchise owner.

9. Hiring/training and retraining of outlet staff. How to handle staff attrition?

Based on the answers to the above questions it would be easy for a prospective franchise owner to make a decision. Once you have made a decision the process to own a food franchise becomes quite simple. We will list the standard steps used by brands to onboard a new franchise partner :

a. The first step is to sign a Letter of Intent and paying the signing fee.

b. It followed by searching and validating the viability of  the store location.

c. Once the location is finalized then signing up the franchise agreement.

d. Getting the store layout designed and starting work on building the store infrastructure is the next step.

e. Hiring/training and certification of staff for the stores is the penultimate step.

f. Pre-launch tests and launch day activity!

 At the outset this may look very complicated but the answer to how to own a food franchise is usually very systematic and straightforward.

[foodfranchisepedia]

Operating  a food franchise: Easier than your thoughts ?

Franchising is one of the most preferred ways to own and operate a restaurant  business. Running a restaurant is a very challenging business as it requires the owner to not just focus on managing operations but also sales and marketing to ensure the business grows and keeps generating the cash flow required to run the show. It is difficult for a standalone restaurant to have good team members to manage different aspect of the business so the owner is forced to dabble with all departments at his restaurant. Which as you can guess seriously dents the chances of the restaurant to become successful.

The above might sound very demoralizing specially if you are an aspiring restaurateur but fret not, owning a restaurant is much easier if you take up a restaurant/food franchise of some of the franchise brands who have matured operating processes.

A franchisee is a simpler version of a standalone restaurant as the brand is responsible to make sure of the following:

a. An attractive menu at a price point preferred by the target audience

b. A vibrant store design and a brand which not just resonates but is also loved by its target audience

c. Standard store operating parameters and guidelines

d. Hiring/training and certification processes for easy staff hiring and deployment

e. Empower the franchise owner with marketing collaterals and case studies of successful campaigns

f. Hand hold the franchise owners to build partnerships with schools/ apartments/ corporates around their stores location to attract not just customers but also bulk orders

g. Train franchise owner with POS and ERP software to manage and track inventory/pilferage/wastage/sales and outlet P&L

When the day to day operations become light, the owner is able to spend more time on growing the outlet's business by focusing on activities which would help in acquiring new customers and on service elements which would ensure high reorder rates.  This is possible only when you are a part of a larger outlet network or if you have a great team.  Since having a great team for a standalone restaurant is usually not financially viable the only easy way to build a large restaurant business is by partnering with a food franchise. You must however make sure you go through the list of responsibilities of the franchise brand as well as the franchise owner. A brand which ensures its franchise owner's less involvement with the outlet's day to day operations is more likely to succeed in the long run.

[foodfranchisepedia]

Food franchise In India

Many people find it surprising that the largest restaurant in India is run on the model of food franchise. Domino's India which is run by Jubiliant foodworks is not just the largest food franchise in India but also the largest restaurant in terms of number of outlets. The example of Domino's shows that it is possible to build a large successful business in India through the franchise route. This is what new age brands like Petoo are attempting to do in the huge but fragmented market of Indian food.

While franchise is definitely the future of Indian food, it however is important to understand certain nuances of how food franchise in India works before one should embark on building a business.

While evaluating a food franchise in India below are some of the things you must do :

1. Study about the cuisine category and its growth potential. Some of the brands offer very innovative menus but creating a new category is an extremely difficult and time consuming proposition. Understanding what sells in the market is key to building a successful business. This is something which brands like Petoo, Naturals Icecream do really well.

2. Understanding the target audience. Who are the target customers of the brand, are they students, or young professionals or families? This is one of the most important criteria  to understand, as the store location should be such that it can generate high footfall of the intended target consumers.

3. Cost of setting up a store and the cost of running the store. You must choose the brands which have low operational costs. New brands like Petoo score heavily on this, their innovations in processes help in reducing the operational costs dramatically.

4. The responsibilities of the brand and those of the franchise owner should be clearly demarcated.

 What you must NOT do when exploring a food franchise in India:

1. Let your food choices drive your business choices. You may love Bengali food, but does that mean opening a Bengali restaurant makes good business sense? Or for example, if you do not like Hyderabadi Biryani and prefer Mughlai Biryani instead, do not reject the Hyderabadi Biryani brand for this reason alone.  Ask difficult questions from the brand representatives on how they plan their menu, if the brand makes a data driven decision it will show and that’s the brand you should choose to work with irrespective of your food choices.

2. Assume that the brand is good or bad just because some other outlets of the same brand did well or did not perform. A franchise outlet performing well or otherwise depends on many factors. Poor location, high running costs and less time spent by franchise owners are usually the top reasons for most franchises not doing well.

3. Trusting ratings of the brand's outlet on review or ordering platforms. There are ways to artificially inflate ratings of outlets on platforms. So a high rating does not indicate great business, check ratings of Dominos or McDonald's outlets on these platforms, you will be surprised at what you find.

4. Treating the business as a mutual fund investment! This is the biggest mistakes franchise owners end up doing. The franchise owner must work hard in ensuring the business reaches profitability, waiting for customers to walk-in is the worst and most expensive mistakes which one can do.

Food franchise in India is one of the fastest growing sectors in India, as the restaurant industry in India is gradually becoming more organized. Most of this organization has been limited to international cuisine and it is only in 2018 when brands like Petoo have been growing steadily to capture the organized Indian food opportunity. Use the above checklist when you are evaluating food franchise in India to get your desired brand and be a part of this fast growing sector.

(Image Sourced)

[foodfranchisepedia]

How does a food franchise work ?

Franchising is one of the best ways to build a business both for a franchise brand owner as well as for a person who wants to run a business (franchise owner). A brand owner benefits from franchising because it can scale one’s business with the help of like minded entrepreneurs who are fully invested and have their skin in the game.

An entrepreneur on the other hand benefits by using his sales and marketing skills to grow a business without having to do everything from scratch. The success of the entrepreneur is crucial for the success of the brand and hence it works well for both parties involved. This is the core essence of any franchise business and this is how a franchise should work.

Food franchise is one of the most popular franchising opportunities you will come across. It is also one of the most misunderstood franchising options. We have evaluated multiple food franchises and will try to explain how a food franchise should work. By using an example of a hypothetical brand and by summarising the process we will explain what typically are the responsibilities of the franchise owners and the brand owners through this article.

A typical franchise owner has the following responsibilities :

a. Financial ownership of all the costs that are incurred in running the outlet (rental, utility bills, repair and maintenances).

b. Managing salaries of the staff, their attendance, leaves and tracking their performances

c. Ensuring all paperwork and licenses required for the running of the outlet is up to date

d. Ensuring the brand guidelines are being followed by the staff (for product and customer service)

e. Building partnerships and finding out growth opportunities for the outlet's business

f. Managing business finances and accounts using the back end system of the brand.

 A food franchise brand owner (in this case) typically has the following responsibilities:

a. Ensuring quality of food is always good and consistent.

b. The brand keeps introducing new dishes in the menu regularly to avoid menu fatigue among regular customers. The Franchise owner should have full knowledge and be fully trained to upsell. 

c. Come up with marketing ideas to increase business and guide franchise partners to execute them well for on ground execution and manage social media content centrally.

d. Build brand level partnerships which has grow the business.

e. Audits and processes to adhere and follow standards at all times.

g. Test and re-train outlet staff to ensure processes are being followed.

 In our opinion only if both the brand and the franchise owner adhere to their respective responsibilities there is a possibility of the relation to work well. This is how a food franchise works and the only mantra behind every successful franchise across the world.